News

The state’s top utility regulator said Tuesday (Oct. 10) a proposed
federal rule some critics say would prop up the nation’s declining coal
and nuclear power industries would put the Trump administration in the
untenable position of selecting “winners” in the U.S. energy
marketplace.

Thomas, in response to a question concerning the U.S. Department of
Energy (DOE) Secretary Rick Perry’s proposal on Sept. 29 to take “swift
action” to address threats regarding the reliability and resiliency of
the U.S. energy grid, said the administration’s actions were not
consistent with an earlier DOE study on the same subject.

“(If) we take a fuel neutral policy, and turn it into where we are
picking winners, even though … EPA Administrator (Scott Pruitt) was
quoted as saying we’re not going to pick winners. What they are doing is
choosing coal and nuclear over (natural) gas and renewables as winners.
I don’t think that is a good way to use the (grid) markets,” Thomas, a
former Republican lawmaker, told an audience of more than 150 energy
officials and policymakers at AAEA’s annual policy meeting.

GRID RELIABILITY AGENDA
Thomas’ comments come only two weeks after the DOE Secretary Rick Perry
took the unusual step of proposing that the Federal Energy Regulatory
Commission (FERC) issue a final rule
requiring its organized markets to develop and implement reforms “to
maintain the reliability and resiliency” of the nation’s grid.

“A reliable and resilient electrical grid is critical not only to our
national and economic security, but also to the everyday lives of
American families,” Secretary Perry said in a statement. “A diverse mix
of power generation resources, including those with on-site reserves, is
essential to the reliable delivery of electricity—particularly in times
of supply stress such as recent natural disasters. My proposal will
strengthen American energy security by ensuring adequate reserve
resource supply and I look forward to the Commission acting swiftly on
it.”

Under direction from President Donald Trump, Perry in April directed
the DOE staff to prepare a report on the reliability of the nation’s
energy grid and then make policy recommendations that could be
implemented quickly. Although Perry’s memorandum never specifically
mentioned the renewable energy industry, it did say subsidies for
certain industries destroyed jobs and economic growth.

After receiving the DOE staff’s 181-page report in late August, Perry
said regulatory burdens introduced by the previous administration were
designed to decrease coal-fired electric generation and nuclear power
and threaten “to undercut the performance of the power grid well into
the future.” Under the new policy recommendations, Perry asked FERC to
push regional transmission organizations such as Little Rock-based
Southwest Power Pool (SPP) to better compensate and expedite the
permitting process for hydroelectric, coal and nuclear plants.

NATURAL GAS AND ‘ELVIS’
But Thomas drew laughter from the AAEA audience after he noted that
Perry’s DOE study cited the low natural gas prices as the primary reason
for the closure of the nation’s coal plant fleet, not renewable energy.
He said the Trump administration’s policy recommendations were not
consistent with the agency’s own DOE study.

“First of all, when the DOE grid study came out, I was relieved
because it said the main culprit in the struggle that the coal
(industry) is having is natural gas. I have said publicly that anyone
who believes otherwise still thought that Elvis was alive,” Thomas said
dryly. “I don’t see the DOE study and the DOE proposal as being
consistent. If it is a (natural) gas problem, then the way to solve it
is too ban fracking if you want to bring coal mines back to work.”

Earlier at the AAEA meeting, a panel discussion that included former
U.S. Rep. Mike Ross, D-Prescott, and energy expert Scott Hamilton also
discussed the DOE directive for new energy grid rules. Both cited the
extraordinary steps taken by Perry to push FERC to address grid
reliability in just 60 days, and then giving grid operators such as SPP
and Midcontinent Independent System Operator (MISO) only 15 days to
implement it.

“These market rules have been 20 years in the making. They are as
much about reliability as they are about cost,” said Ross, SPP’s vice
president of governmental affairs and public relations. “This is the
most substantive proposed change to market rules in the wholesale
electric market in over a decade.”

Hamilton, regional director at MISO’s Little Rock office, said the
DOE recommendations also include a controversial proposed rule that
energy producers must secure a 90-day fuel supply onsite during an
emergency such as a hurricane or other natural or man-made disaster,
which solely applies only to coal and nuclear power plants today.

“Well, we are still trying to figure out what is the definition of
resiliency. Also, what is a 90-day fuel supply? Is that coal, nuclear …
and the sun kind of hangs around for 90 days,” Hamilton said jokingly.

Ross, who sat on the influential U.S. House Committee on Energy and
Commerce, added: “Part of this is that President Trump has made a pledge
to the coal industry that he would support them, and I think he is
fulfilling that pledge.”

Ross’ and Hamilton’s panel, which also included Peter Candelaria,
chief technology officer at solar producer Silicon Ranch, discussed the
impetus behind the robust growth experienced by Arkansas’ renewable
energy sector over the past decade. One presentation noted that
renewable energy generation in Arkansas is nearing 20%, while coal use
has declined from 76% to below 50%.

“We don’t choose the winners and losers, the market does that,” Ross said.

Last month, following a year-long study by a PSC-called “working
group,” state regulators submitted split recommendations on regulations
to govern how Arkansas’ net-metering customers may generate their own
power and receive a retail credit for any unused power sent back to
their local utility.

Traditional utilities, such as Entergy Arkansas, Arkansas Electric
Cooperatives and Southwestern Electric Power Co., are advocating an
“embedded” cost of service approach to determine the costs and benefits
of net-metering. The second group, which includes AAEA, Sierra Club and
Scenic Hill Solar, seek a continuation of the current net-metering rate
design until a cost-benefit analysis has been conducted and approved by
the PSC.